NOTE 16. INCOME TAXES

Income tax benefit (expense) for the three and nine months ended January 31, 2026, resulted primarily from estimated domestic and foreign taxes included in the calculation of the effective tax rate.

During the third quarter of fiscal 2026, the Company recorded approximately $15.3 million of income tax expense related to foreign withholding tax matters. This amount included approximately $9.7 million reimbursed to Samsung Electronics Co., Ltd. (“Samsung”) for withholding taxes paid by Samsung to the Korean tax authorities on royalty payments made to the Company, as well as approximately $5.6 million related to reducing the carrying amount of LG Electronics Inc. (“LGE”) long-term withholding tax deposits to zero.

The Samsung amount arose following a November 19, 2025 decision by a Korean administrative appeal authority that upheld withholding tax assessments on royalties paid to the Company. Pursuant to the terms of the applicable license agreement, the Company reimbursed Samsung in December 2025 for the withholding taxes paid.

The LGE amount arose after the Company determined during the third quarter of fiscal 2026 that it would discontinue litigation related to certain Korean withholding tax matters involving LGE. Because the recoverability of provisional deposits previously made in connection with those matters depended on successful resolution of the related proceedings, the Company concluded that the remaining carrying amount of such deposits was not recoverable and reduced the carrying amount of the related long-term deposits to zero. The related income tax expense was partially offset by reversal of the associated FIN 48 accrual.

During the third quarter of fiscal 2026, the Company also recorded a $6.6 million reduction in income tax expense for estimated additional foreign tax credits, foreign amended tax return refunds, and other business credits related to the foregoing Korean tax matters.

Accordingly, the net impact of these Korean tax matters on the Company's income tax provision for the third quarter of fiscal 2026 was an increase in income tax expense of approximately $8.7 million.

We maintain a valuation allowance for certain deferred tax assets in the United States and Canada, which management believes are not more likely than not to be realizable in the future. Changes in provision for income taxes resulted primarily from the change in income from continuing operations across various tax jurisdictions.

In the event that we determine the deferred tax assets are realizable based on an assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made. The valuation allowance does not impact our ability to utilize the underlying net operating loss carryforwards. We also maintain liabilities for uncertain tax positions.

As of January 31, 2026, we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $10.0 million, all of the $10.0 million could be payable in cash. In addition, interest and penalties of $1.6 million could also be payable in cash in relation to unrecognized tax benefits. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $11.6 million. We account for interest and penalties related to uncertain tax positions as a component of income tax provision. We do not expect to have any significant changes to unrecognized tax benefits during the next twelve months.

Barnes & Noble Education

Barnes & Noble Education recorded an income tax expense of $1.8 million on pre-tax income of $5.1 million during the nine months ended January 31, 2026, which represented an effective income tax rate of 34.9%.

In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some or all of the deferred tax assets would be realized. As of January 31, 2026, Barnes & Noble Education determined that it was more likely than not that it would not realize all deferred tax assets and its tax rate for the current fiscal year reflects this determination. Barnes & Noble Education will continue to evaluate this position.